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Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

Quarter in Detail

During the quarter, Ventas funded investments of around $110 million. This included $53 million of acquisitions with existing partners in its seniors housing portfolio, as well as $57 million of funding for its share of development, and redevelopment projects for projects presently in progress.

For financing its investments, the company issued and sold 1.1 million shares of common stock, reaping net proceeds of $74 million under the “at the market” equity offering program. Further, it disposed properties and obtained final repayments on loans receivable for proceeds of $45 million.

Liquidity

Presently, the company enjoys solid liquidity with $2.6 billion of available borrowing capacity and $95 million of cash on hand.

2017 Outlook

Ventas reaffirmed its outlook and expects 2017 normalized FFO per share in the range of $4.12–$4.18. The Zacks Consensus Estimate for the same is currently pegged at $4.17.

The company anticipates same-store cash NOI growth of 1.5–2.5% in 2017.

Additionally, Ventas expects skilled nursing facilities (SNF) sale to take place in phases, starting in the third quarter, and likely to conclude by the end of this year.

Our Take

We are encouraged with the better-than-expected performance of Ventas in the second quarter. We believe the company’s adequate size and scale would help it capitalize on opportunities such as increasing healthcare spending and aging population. Furthermore, the sale of the SNF would lower the company’s exposure to this particular healthcare real estate category which is becoming more susceptible to top-line pressure due to the change in medical billing procedure.

Also, university-based life science real estate is a new zone of investment which has grabbed attention and Ventas has already committed substantial amount to this segment. Such investments offer scope to capitalize on growing health-care-driven research and development, supported by top-tier research universities. However, hike in interest rate is a concern for the company, considering its substantial exposure to long-term leased assets.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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